Special report: Is aid doing Haiti more harm than good?

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A combination photograph shows Haitians passing near a damaged clothing store after an earthquake in Port-au-Prince, on February 13, 2010 (bottom) and seven months later on September 30, 2010 (top).

Analysis & Opinion

PORT-AU-PRINCE (Reuters) - It was Haiti's premier private hospital, its rooms filled with the latest medical equipment, its surgeons trained in the latest techniques, its thick walls built to withstand an earthquake.

Those walls stood firm when the earth shook on January 12, and for three months after that devastating quake the CDTI du Sacre Coeur Hospital threw open its doors, treating thousands of victims free of charge.

American and French doctors, flown in by their respective governments, worked non-stop in CDTI's operating rooms together with their Haitian counterparts seeing more than 12,000 patients and performing more than 700 major surgeries.

Today, the hospital stands empty, its consulting and operating rooms abandoned, its beds unused, its scanners gathering dust, its two brand new ambulances sitting under tarpaulins in the yard. On April 1, owner Reynold Savain was forced to close CDTI because neither the Haitian nor U.S. governments, nor the United Nations, would agree to help pay his bills.

The echoing corridors of the hospital are a monument to the failure of the Haitian government and the international community to work with the private sector to rebuild. The risk is that billions of dollars of aid will once again fail to leave any lasting legacies in the Western Hemisphere's poorest country.

A cholera outbreak in recent days only underlines the vulnerabilities of Haiti's dysfunctional systems.

Savain said when he asked the World Health Organization to help cover his doctors' salaries, they offered to pay in food and blankets, of no use to professionals who needed cash to pay rent and school fees.

"Philosophically, they can't work with the private sector, that is the real issue," the white-haired Savain said as he opened door after door to empty rooms.

"They want to put everything through the public sector, but they have to find a way to strengthen the private sector."

Friends say Savain made mistakes too in handling the issue, sending invoices to the U.S. Agency for International Development (USAID), as though he had a right to charge every patient his full private rates at a time of national emergency, instead of looking for a compromise.

Nonetheless, nine months after the earthquake struck, there is a strong sense that the Haitian government, foreign donors and non-governmental organizations (NGOs) and the domestic private sector are simply not pulling in the same direction, not even talking the same language.

HEALTH SYSTEM VULNERABLE

Time after time, Haiti has endured disaster followed by aid that did little to build long-term prosperity -- bypassing both the government and the private sector. From corrupt politicians to nepotistic elites and well-meaning outsiders who thought they knew best, there is plenty of blame to go around.

The question is how to break the cycle and rebuild after the quake which killed at least a quarter of a million people and rendered more than a million homeless, leaving vast swathes of Port-au-Prince in ruins.

The disaster drew an outpouring of sympathy from around the world and foreign aid has had significant successes. But it is not providing, and seems unable to provide, permanent private sector jobs. This is nowhere more apparent than in agriculture and in private healthcare.

Clean running water, medical care and food now reach many of the 1.3 million people in the tented camps which are crammed into every available space -- between rubble and buildings -- on the steep hills of the chaotic capital. Famine and epidemics had largely been avoided until an outbreak of cholera killed more than 250 people in recent days, raising fears of a broader epidemic. Healthcare for the average city dweller may even be better than before the earthquake, even if that is a pitifully low bar by international standards.

But employment is still hard to come by, even for highly qualified Haitians. In one of the camps, American nurse Beth Middleton opens her bag to show half a dozen resumes she has received just that morning from doctors seeking work, educated men who Haiti desperately needs but who are languishing under the tents which surround her.

"The healthcare that was in place before the earthquake was crippled by the relief effort," she said. "Pharmacies closed because of all the free drugs, and doctors lost all their patients."

In the earthquake affected areas, nearly two-thirds of hospitals were severely damaged or completely destroyed.

Policarpe Jean Yves' pharmacy was knocked down by the earthquake, and these days he sits on the steps of a small nearby store a friend lets him use, the shelves behind him bare apart from a few, scattered and lonely boxes of medicine.

He is still paying the loan on his old shop, at interest rates of four or five percent a month, but business is bleak.

Free foreign drugs are flooding the market, either given directly to camp dwellers or resold cheaply on the quiet, doctors have fled the area, and prescriptions are down.

"Demand is not the same any more, and I don't have much stock anyway." he said, listening to the radio. "Now, this is no business. I am just sitting here reflecting on what to do."

THE MISTAKES OF THE PAST, REPEATED

Haiti, which won independence from France in 1804 after a slave revolt, has become a by-word in how not to administer foreign aid. Benefits channeled through foreign agencies and NGOs have robbed the government of legitimacy, and distorted the local economy by pushing up wages, rents and prices.

Foreign organizations have plundered government ranks for qualified staff, and a failed export-led growth model has left the country ever more dependent on imports and aid.

Edmond Mulet, the head of the United Nations mission in Haiti, said the international community was partly responsible for the weakness of the Haitian state, because it did not trust -- and so consistently bypassed -- successive governments.

"We created this Republic of NGOs, almost 10,000 NGOs, some of them are extremely responsible and doing good work, but many, many other ones are there, and nobody knows what they do, and nobody knows where the money comes from or is going to."

"And we have created these parallel structures, in education, in health services, in all sorts of responsibilities that the Haitians should be assuming themselves," he said.

"Building back better" was the mantra of former U.S. President Bill Clinton and the entire post-quake reconstruction effort, but there is very little sign of that fundamental shift.

The international community seems unable to change gear successfully from emergency aid to long-term development -- different tasks performed by different groups of people that never quite seem to mesh. Instead all the familiar problems of international aid have re-emerged, writ large.

The massive influx of free foreign food undercut local agriculture, reducing prices and hurting farmers' incomes, Oxfam International said in a report this month, adding there was still too little emphasis on developing the island's agriculturally based economy.

It is a complaint that has also been made by Haitian President Rene Preval, who has repeatedly asked for more food aid to be sourced locally.

USAID is spending $126 million over five years to support the rural population outside Port-au-Prince, and in August introduced two grants to help Haitian families buy local food. A spokesman said it was trying to strike the right balance between life-saving assistance and long-term development.

But a ban on direct assistance to industries that compete with U.S. exports, and extensive exports to Haiti of rice, sugar and poultry, have undermined those goals, Oxfam said.

Ironically, Haiti is the third largest export market for American rice, its tariff of just three percent way under a Caribbean average of 38 percent. Politically powerful U.S. rice exporting states like California, Arkansas and Texas may benefit, but Haitian farmers certainly do not.

"The international community must abandon these conflicting trade and aid policies in order to support the growth of Haiti's fragile rural economy," said Philippe Mathieu, Oxfam's director for Haiti.

REVERSING THE MIGRATIONS, SAVING THE MIDDLE CLASS

Haiti is a country of migration. Before the earthquake, an average of 75,000 people would migrate from the countryside to the capital every year in search of jobs and opportunity.

Resettling people to the countryside without that investment, without job opportunities and public services, he said, was simply a waste of time. The problem is money, because much of the aid is tied to humanitarian not development goals.

"I believe I won't find a lot more (money), because the governments, they love Haiti, they pledge to support us but they are not going to be able to engage a lot more for Haiti," Bellerive said in an interview.

"So the only way to find more money is to attract private money to do business in Haiti, and making it profitable."

Private investment would go a long way to solving Haiti's other big migration problem, of its middle classes, who flee en masse to the United States and Canada.

More than 80 percent of people who completed university education have ended up leaving the country, according to U.N. data, the highest rate among least developed countries. Their remittances sustain the Haitian economy, but reducing or even reversing that migration is Haiti's only long-term hope.

Yet, so far, the middle classes seem to have been ignored. In a rush to help the poor, rebuild the state and woo big foreign investors, they have been forgotten.

"The middle class is the biggest victim of the earthquake, that's clear," Bellerive said. "And they are the only one that no one is taking care of, starting with us, the government."

They are victims like Marc Eddy Jean Francois, a 42-year-old businessman who used to run a computer school and electronics shop before the quake. Most of his stock was destroyed. His landlord asked him to pay to repair the damage and refused to refund his rent.

Today, he has set up shop in a makeshift stall on a sidewalk, cobbled together with corrugated iron and an old door, rather optimistically called "Radio Galaxie." His stock is a lone reconditioned laptop, a video camera, a few flashcards, some batteries and a plastic torch, all, he said, loaned him by vendors.

Eddy's family used to own a grocery store, and he studied management with dreams of becoming a successful businessman and ultimately following his brother abroad. But those dreams have been hard to realize.

"The middle class don't have hope to go forward," he said, sitting on a bench on the sidewalk outside his shop, a dog sniffing at a pool of stagnant water and garbage close by.

"For the middle class, it's 'sauve qui peut' (everyone for themselves)," he added with a shrug and a smile.

HOPE FOR THE FUTURE

There is a flicker of hope over the horizon for people like Eddy, with Haitian authorities preparing a partial credit guarantee fund, which they hope will bring down interest rates to affordable levels on $140 million in loans to allow small businesses and entrepreneurs to get back on their feet.

But the engine of foreign investment, on which Bellerive is depending, is still sputtering.

There have been some significant projects announced, the biggest a $100 million investment in the state telecoms company by Vietnamese military-run company Viettel.

A South Korean textile manufacturer, Sae-A Trading Company, announced it would form part of a project to develop an industrial park and garment making operation in Haiti, aimed at creating 10,000 jobs. Other garment manufacturers are also sniffing around, seeking out low wages as costs rise elsewhere, and after the U.S. Congress this year expanded duty-free access to the U.S. clothing market.

On the outskirts of the capital, building continued on a brand new $56.7 million electricity generation plant despite the earthquake, and the Haitian-South Korean joint venture plant is due to come on line in January.

But planned investments in hotels and tourism, with five chains interested before the earthquake, were swept away, said Jocelerme Privert, an economic adviser to the president.

Mulet says foreign investment is seriously held back by the absence of the rule of law, something he blames on the political and business elite who benefit from the status quo and lack political will to change.

"All the reconstruction effort, all the investments, all that is being done on humanitarian assistance to the people... everything will be in vain unless the Haitians themselves lead in creating the rule of law in Haiti," he said.

The Caribbean nation, which lies just east of Cuba on half of the historic island of Hispaniola, has a reputation for corruption, tropical intrigue and explosive social and political violence, famously encapsulated in Graham Greene's novel "The Comedians".

Dictators like Francois "Papa Doc" Duvalier and his son Jean-Claude "Baby Doc" teamed up with powerful local and foreign businessmen to keep the bulk of the mostly rural population crushed under grinding poverty.

"THE REPUGNANT ELITE"

Like the hospital owner, Savain, Richard Coles is a light-skinned member of the business elite, and he freely admits his peers have played an undistinguished role in their country's checkered past.

"We never respect the rule of law, we easily conspire to overthrow the government but never to rebuild the country, we use our access to the national palace to further our business interests but we never go to the national palace to say 'do something for the people in Cite Soleil,'" he said, referring to the capital's infamous slum.

"We spend our good money in the U.S. and not in Haiti," he added. "The country gave us everything and we gave nothing in return."

And yet, Coles argued, the international community needs to stop seeing business leaders as a "repugnant elite" and collaborate with them to rebuild the economy.

Coles runs MultiTex, a branch of the sprawling family business that employs 3,000 people and turns out two million T-shirts a week for export to the United States and Canada.

What is lacking, whether in the chaotic NGO effort and in the private sector, is government leadership, he said in his office, sewing machines humming under strip lights on the factory floor below.

"Everyone wants to do good, but the sum of so much goodwill is so pitiful," he said.

Coles wants a master plan from the government, some "predictability", a sense of where the country is going, what sectors of the economy to invest it and some help in accessing the capital to invest.

"Unless there is a master plan for Haiti, the Haitian private sector will keep on surviving, but will never be an actor for development," he said.

"Once we have a plan, energies will be channeled to rebuild the country. With no plan, the energy will be wasted."

Since coming to power in 2006, Preval's government had gained a decent reputation abroad for promoting reforms and business. But it was crippled by the quake, losing ministry buildings and scores of trained civil servants.

Even so, many quake victims grumble the government has been slow to attend to their needs, and even Mulet talked of the need for a "renewal in the political energy" and new leadership after presidential elections in November.

Sitting in his hill-top villa overlooking Port-au-Prince, Prime Minister Bellerive seems almost paralyzed by the challenge he faces. Government plans do exist but he acknowledges there is not the clarity there could be -- something he blames squarely on the international community.

Even though Haiti has been following IMF programs for years Bellerive said a poverty reduction plan drawn up in 2006, and "applauded by the whole world", was simply not financed.

"We are not going to waste months preparing a plan without knowing who is going to finance it," he said.

Almost all the money that has flowed into Haiti since the earthquake has bypassed the government completely, much of it flowing through NGOs who do not even coordinate with the government, he said. Even the $11 billion that has been pledged over the next decade is uncertain to arrive and largely out of his control, he said.

"I don't know how much and when it will come," he said. "How are you going to plan for that?"

So we come full circle, all the actors in Haiti almost overwhelmed by the scale of the problems. "Everyone is blaming each other, but everyone is responsible," said Coles.

Perhaps when November's elections are out of the way, if there is macroeconomic stability and some more forceful leadership, business leaders say, there is still hope to get Haiti's reconstruction back on track and its private sector back on its feet.

But in October, with the vast bulk of the rubble still uncollected and the vast majority of survivors still living under canvas, there is little to give substance to those hopes.

The money that has come so far seems to washed over Haiti without leaving much behind, except more dependence on aid.

"And when the money runs out, we are ... " Savain said grimly in his empty hospital, drawing his hand across his neck in a chopping motion.